Federal Liberal Leader Stéphane Dion told an eager Toronto crowd Tuesday he would make a $2-billion annual gas tax transfer to cities and municipalities permanent if he were elected prime minister.

"The transfer of the gas tax will be permanent with me," Dion said in a speech to the Toronto City Summit Alliance in which he stressed the need for funding to help cities such as Toronto absorb new immigrants in the next 25 years.

Liberal Leader Stéphane Dion speaks at the Toronto City Summit Alliance in Toronto on Tuesday.
(Aaron Harris/Canadian Press)

"The federal goverment must do more for its gateway cities, and I will answer that call."

The previous federal Liberal government made the plan to turn 1.5 cents a litre over to municipal governments for infrastructure projects, with a planned increase to five cents a litre by 2010 as part of its new deal for cities. The $2-billion figure is the amount estimated to be given to municipalities in 2010.  

Dion's promise echoed a call made this month by mayors of 22 of Canada's largest cities in which they said their urban centres would be unable to compete globally without the guaranteed permanent funding the gas tax transfer provides.

But Dion stopped short of endorsing Toronto Mayor David Miller's aggressive "One Cent Now" campaign to get Ottawa to give one cent of the GST to cities.

One cent of the GST collected in Toronto amounts to $400 million. If all Canadian municipalities were given one cent, it would cost the federal government $5 billion.

'It's a lot of money'

"I understand why he's asking for that, but it's a very big ticket," Dion said. "I'm open to look at that, but … it's a lot of money."

Federal Finance Minister Jim Flaherty quickly denounced Miller's plan Monday, instead backing tax reductions for all Canadians, which he said would go directly to their pockets, not through other governments.

But Dion said Flaherty's plan ignored the specific infrastructure problems facing municipalities, especially the ones facing the Greater Toronto Area such as reducing road congestion and public transit.

"You cannot build roads with tax cuts; you don't help new Canadians get jobs with tax cuts," Dion said. "This is not a recipe for success for Canada."

Cities would also benefit, he added, if the Conservatives reversed funding cuts to agreements under the previous Liberal government on research and development funding and the national child-care program.

He also called for the Tories to renew programs to help the working poor and immigrants improve their standard of living.